Welcome, Guest! - or
Easy to remember!  »  VinNews.com

Washington - Those Tax Breaks In The GOP Plan? Enjoy Them While They Last

Published on: December 4, 2017 04:02 PM
By: AP
Change text size Text Size  
A demonstrator holds a sign outside the U.S. Capitol to protest the Republican tax plan as it works through the Senate in Washington November 30, 2017. REUTERS/James Lawler DugganA demonstrator holds a sign outside the U.S. Capitol to protest the Republican tax plan as it works through the Senate in Washington November 30, 2017. REUTERS/James Lawler Duggan

Washington - President Donald Trump has touted his tax overhaul as a once-in-a-generation opportunity. Yet the plan Senate Republicans have embraced could force lawmakers to rewrite the tax code repeatedly for years to come.

The main reason is that some of its key planks are set to expire, thereby forcing tough choices on a future Congress about whether to renew them.

The tax cuts for individuals and families? They’d vanish after eight years.

Advertisement:

The breaks for companies to fully expense new equipment? Gone by 2023.

Tax credits for employers that offer medical and family leave? Not after 2020.

A reduced excise tax for craft brewers and distillers? No more after 2020.

The whole setup means lawmakers will ultimately face pressure to renew these tax cuts. Letting them lapse could ignite a public backlash because people’s taxes would shoot up. When Congress faced a similar predicament in 2013, economists warned that tax hikes might tip the economy into a recession. In the end, most of the tax cuts were preserved.

Yet extending the tax cuts could require slashing spending on popular programs, possibly including Medicare and Social Security. Or it could mean letting the deficit climb much faster than Trump and lawmakers have promised, which brings its own economic risks.

Republican lawmakers have tried to assure voters that tax cuts for the middle class will be protected. But the tax overhaul creates a perilous series of votes for lawmakers in coming years.

“‘Governing from crisis to crisis is exactly the way to put it,” says Steve Bell, a senior adviser at the Bipartisan Policy Center and a former staff director at the Senate Budget Committee.

This problem is a byproduct of the decision by the Trump administration and Republican leaders that the best way to revamp the tax code was to bypass Democrats. Under Senate rules, permanent tax cuts that raise the deficit need 60 votes. The slim 52-seat Republican majority agreed to pass tax cuts that would add no more than $1.5 trillion to budget deficits through 2027. Starting in 2028, the tax cuts can’t add to the deficit.

Because of these restrictions, Republican senators made a decision: They would make the income tax cuts for individuals only temporary, in order to pay for making the tax cuts for corporations permanent.

The Senate bill will now have to be reconciled with the similar but separate bill the House passed before it can go to Trump for his signature. But for now, here are three big risks created by the expiring tax breaks:

___

MIDDLE CLASS TAX HIKES

The Senate bill would repeal the tax cuts for individuals and families after 2025. That return to the existing rates would set the stage for a sharp tax increase for many millions of households, according to estimates by the Congressional Budget Office and the Joint Committee on Taxation. Personal income taxes would shoot up $430 billion between 2025 and 2027. The tax hikes would likely keep accelerating in the years afterward.

Who’d be hit? Mainly, those squarely in the middle class, with incomes between $54,700 and $93,200. Nearly two-thirds of this group would pay on average $140 more than they currently do, according to an analysis by the nonpartisan Tax Policy Center.

Not only would their tax rates return to higher levels. They would also lose the increase to the standard deduction and the child tax credit that congressional Republicans have been touting as needed relief.

___

END OF BREAKS FOR EXPENSING EQUIPMENT

Trump administration officials have said a key goal of their tax overhaul is to encourage companies to invest more freely in equipment and workers. The bill aims to deliver on this goal by letting companies fully and immediately deduct depreciation on new investments.

The conservative Tax Foundation estimated in June that full expensing could do more to propel economic growth than a cut in corporate rates would. Republicans are so eager to capture this growth that the Senate bill would let companies retroactively expense gear they bought in September of this year.

But it wouldn’t last long. This provision would expire in 2023, meaning that many companies might then pull back on their investment in equipment and workers. This could potentially weaken economic growth.

Drew Greenblatt, a board member for the National Association of Manufacturers and head of Marlin Steel in Baltimore, said in an interview in September that he would push lawmakers to preserve full expensing.

“We’re hoping that within the five-year period Congress will come to its senses and make it permanent,” Greenblatt said.

There’s no guarantee, though, that lawmakers would do that.

___

MORE GOVERNMENT DEBT

Suppose Congress were to vote to extend the tax cuts that are scheduled to expire. Doing so would also mean that lawmakers would either have to approve much higher deficits or possibly cut spending on major domestic programs. Previous attempts to shrink the deficit forced spending cuts in defense and other discretionary programs, including for scientific research and for children involved in the Head Start services.

If all the expired tax cuts were preserved and spending stayed constant, the deficit would increase by $1.9 trillion over 10 years and continue to rise in the next decade, according to estimates by the Center for a Responsible Federal Budget.

Ever-rising budget deficits can ultimately depress economic growth. Additional government debt can crowd out private investment in companies that might otherwise help the economy expand. And the government would likely reduce its own spending on long-term investments because it would need to spend more to repay interest on the debt.

“Their intention here is to the hide costs,” said Marc Goldwein, policy director at the Center. “But in the process, they’re making the tax bill less pro-growth, more complex and more vulnerable to politics.”

 

 



More of today's headlines

Washington - The Supreme Court is allowing the Trump administration to fully enforce a ban on travel to the United States by residents of six mostly Muslim... Warsaw, Poland - A Polish court has given a suspended one-year sentence to a 17-year-old American for scratching his name into the barracks at the former Nazi German...

 

Total6

Read Comments (6)  —  Post Yours »

1

 Dec 04, 2017 at 04:49 PM peretz2 Says:

Which begs the question -- if frum families in particular are going to be hit hard by this legislation, where is Agudah, OU, etc.

2

 Dec 04, 2017 at 05:43 PM Educated Archy Says:

Reply to #1  
peretz2 Says:

Which begs the question -- if frum families in particular are going to be hit hard by this legislation, where is Agudah, OU, etc.

The answer is that frum families won't be hurt so much . Tax credits are going up both in terms of income limits and dollar amounts . Many deductions are still here to stay . After reconciliation they'll prob be a few more deductions. And the level at which the rate crosses from 20 to 25% is higher . Overall frum families are about neutral under this bill .

Yes if the tax cuts expire in 8 years then we'd lose but no congress will allow that as it's toxic .

So overall it neutral for frum families .

3

 Dec 04, 2017 at 05:49 PM Educated Archy Says:

I still for the life of me don't know what's wrong with the Archy plan .

Here is the plan,

Cut individuals tax rates for those under 250 k by a third

How do we pay for it ?
Cap programs . Don't cut but cap programs . Impose a simple max limit of entitlements . One can only receive say 50k of total monies from the govt in one year . So say you get tax credits , wic hud Medicaid food stamps chs etc ... the total value of all those free goodies can't exceed 50k annually .

Nice and simple plan

4

 Dec 04, 2017 at 07:44 PM yamsar Says:

Reply to #3  
Educated Archy Says:

I still for the life of me don't know what's wrong with the Archy plan .

Here is the plan,

Cut individuals tax rates for those under 250 k by a third

How do we pay for it ?
Cap programs . Don't cut but cap programs . Impose a simple max limit of entitlements . One can only receive say 50k of total monies from the govt in one year . So say you get tax credits , wic hud Medicaid food stamps chs etc ... the total value of all those free goodies can't exceed 50k annually .

Nice and simple plan

Stop

5

 Dec 05, 2017 at 01:16 PM Realistic Says:

Reply to #2  
Educated Archy Says:

The answer is that frum families won't be hurt so much . Tax credits are going up both in terms of income limits and dollar amounts . Many deductions are still here to stay . After reconciliation they'll prob be a few more deductions. And the level at which the rate crosses from 20 to 25% is higher . Overall frum families are about neutral under this bill .

Yes if the tax cuts expire in 8 years then we'd lose but no congress will allow that as it's toxic .

So overall it neutral for frum families .

under the senate version

- tax rates are going back to current levels
- Child tax credit is rolled back to current levels

the biggest changes

- doubline the standard deduction +12,000
- eliminating the personal exemption -4,100 x family members (6 kids = 32,800)

so who is the loser? large families
and who is the winner? large corporations

6

 Dec 05, 2017 at 03:39 PM Educated Archy Says:

Reply to #5  
Realistic Says:

under the senate version

- tax rates are going back to current levels
- Child tax credit is rolled back to current levels

the biggest changes

- doubline the standard deduction +12,000
- eliminating the personal exemption -4,100 x family members (6 kids = 32,800)

so who is the loser? large families
and who is the winner? large corporations

Child tax credit is rolled back to current levels

Meaning not getting upped to $1,600? In fact here is a copy and paste from forbes.

"Under the Senate bill, the child tax credit would bump to $2,000 per child under the age of 18, subject to phaseouts. "

So an additonal $1,000 credit not deduction but credit per child is good for large families.

7

Sign-in to post a comment

Click here to sign-in.

Scroll Up
Advertisements:
Sell your scrap gold and broken jewelry and earn hard cash sell gold today!